Question
A company is considering closing one of its product lines. Current data on the product line are as follows: Sales revenue $50,000 Variable costs (36,000)
A company is considering closing one of its product lines. Current data on the product line are as follows:
Sales revenue $50,000
Variable costs (36,000)
Direct avoidable fixed costs (9,000)
Indirect allocated fixed costs (7,000)
Net income (loss) on the product line ($2,000)
The direct avoidable fixed costs will be eliminated if the product line is closed. The indirect allocated fixed costs will remain the same whether the product line is continued or closed.
By how much will overall company net income change if this company decides to discontinue this product line?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started